As much as I love my job, I have no intention of working until I’m too old to enjoy my retirement. Mr Frugal feels exactly the same, so a couple of weeks ago, we sat down and had a good talk about money and what our hopes were for the future.
I wanted to share our plans with you to show what we achieved in the space of an hour sat on the settee with a cup of tea because I don’t think
We’d like to be able to retire at 60 ideally which means that we need to really up our game as far as our financial planning is concerned. I’ve been doing some research and I’ve found out that income-wise, it’s recommended that you have between half and two-thirds of your working salary provided that your mortgage is paid off.
I currently have a pretty good workplace pension with match contributions which I currently pay the maximum in to get the full matched contributions along with an extra 3%. Mr Frugal currently doesn’t pay in anything extra over and above what he needs to in order to benefit from the full match contributions.
Our pension pots still aren’t looking as healthy as we’d like them to so we know that we need to focus on that and we’ll be increasing our contributions there but I’m not convinced that’s going to make the difference that we need it to.
So, here’s the plan.
The Mortgage
We’re going to keep on overpaying our mortgage with the plan to completely pay it off within the next ten years. We have a standing order set up to overpay automatically and I pay off as much as I can whenever I have spare. That gives us a good ten years between paying off our mortgage and the date we want to retire with no mortgage to pay – we’ll get back to that in a minute.
Our Investments
We’ve started (only just) saving £100 a month with a view to investing in a medium return investment fund. There’s a few about so we’re just looking into what our best options are so at the moment, the money is going into a savings account.
£100 a month over £20 years on a medium return of 4.5% would mean that we had a pot of £35,000 in 20 years.
Then factor in the additional £500 a month for the 10 years between paying off the mortgage and potentially retiring then that could be an additional £72,500.
And I know that these are just figures pulled out from a calculator and the returns could be higher or lower but I wanted to get these figures down on paper because if our plans work then that’s £107,500 extra that we can call on to enjoy our retirement.
Stocks and Shares
We both take part in our work’s share save and share purchase schemes although we don’t put enough aside to make much of a difference in the long run. I think I put aside £30 every month and Master Frugal does £20 as the deal seemed better with my work at the time but we could both do with upping our contributions – especially as it comes out of my salary before tax so in effect my £30 is actually only costing me £25 ish which is then buying shares at less than the market value. In my head, I’ve worked out that for £25 each month I’m getting around £36 worth of shares. It’s win-win all round unless the shares prices crash but seeing as our investment is long term I’d hope they’d go back up again at some point.
Other Plans
We have lots of other things that we’d like to do which include buying an investment property either here in the UK or abroad but we’re not in a position to do that right now so that’s not going to happen in the near future but it’s something we’d like to keep on the radar. We don’t want us buying a second property to compromise our other plans so we want to make sure we can do both and the whole rental thing scares us right now.
This is our little secret but I’m starting to think that maybe I’d like to move house in a couple of years. Mr Frugal is dead against it but I’m seriously tempted. We made a conscious decision when bought this house to buy a smaller house than we could afford because we wanted to have more money to spare each month to do things with the kids which I don’t regret at all s we’ve been able to afford to do more than we would have done if we’d had a higher mortgage. It’s not that our house is small or that I don’t love it, more that we’ve changed so much as a family and our priorities when we bought this house are different – now I’d love a bigger kitchen and more outside space. This is where there could be a spanner in the works and I’d be OK if it didn’t happen but I want to consider the possibility.
That’s about as far as we got!
I love that we’re on the same page and really enjoyed the talk as it helped to get us both on the same page. We had vague long term goals but without this chat, we might not have got started on the next stage of our journey until later down the line.
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